What changed in this filing

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Item 1. Financial Statements

2024-04-25 compared with 2023-10-26 · 231 added, 325 removed, 442 unchanged (56% of the section changed)

1 unchanged sentence

Consolidated Balance Sheets

(In millions, except par value data) September 30, 2023 December 31, 2022

(In millions, except share and par value data)

March 31, 2024 December 31, 2023

Current assets:

16 unchanged sentences

Accrued payroll and related expenses 110.5 171.0

Current portion of long-term senior convertible notes 124.2 772.6

Short-term operating lease liabilities 20.7 21.1

8 unchanged sentences

Preferred stock, $ 0.001 par value, 5.0 million shares authorized;

no shares issued and outstanding at September 30, 2023 and December 31, 2022

no shares issued and outstanding at March 31, 2024 and December 31, 2023

Common stock, $ 0.001 par value, 800.0 million shares authorized;

405.5 million and 386.4 million shares issued and outstanding, respectively, at September 30, 2023;

408.5 million and 396.1 million shares issued and outstanding, respectively, at March 31, 2024;

and 407.2 million and 385.4 million shares issued and outstanding, respectively, at December 31, 2023

4 unchanged sentences

Treasury stock, at cost;

19.1 million shares at September 30, 2023 and 6.9 million shares at December 31, 2022

12.4 million shares at March 31, 2024 and 21.8 million shares at December 31, 2023

( 1,394.7 ) ( 2,451.1 )

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(In millions, except per share data) 2024 2023

4 unchanged sentences

Research and development 141.5 119.0

Amortization of intangible assets 1.7 1.8 5.2 5.7

Selling, general and administrative 319.3 296.4

1 unchanged sentence

Operating income 101.1 47.2

Income from equity investments 1.0 — 1.0 0.2

Other income (expense), net

33.9 ( 1.3 ) 82.4 ( 8.4 )

Income before income taxes 132.5 64.5

Income tax expense 119.7 45.0 179.0 8.2

Income tax expense (benefit) ( 13.9 ) 15.9

Net income $ 146.4 $ 48.6

6 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(In millions) 2024 2023

3 unchanged sentences

Unrealized gain (loss) on marketable debt securities ( 1.4 ) 3.7

Total other comprehensive loss, net of tax ( 6.3 ) ( 18.1 ) ( 24.0 ) ( 41.6 )

Total other comprehensive income (loss), net of tax ( 20.6 ) 5.1

Comprehensive income $ 125.8 $ 53.7

1 unchanged sentence

Consolidated Statements of Stockholders’ Equity

Three Months Ended September 30, 2023

(In millions) Common Stock Additional

Capital Accumulated Other Comprehensive Loss Retained Earnings Treasury Stock Total

Stockholders’

Shares Amount

Balance at June 30, 2023 386.1 $ 0.4 $ 2,269.0 $ ( 29.3 ) $ 644.4 $ ( 784.1 ) $ 2,100.4

Issuance of common stock under equity incentive plans 0.1 — — — — — —

Issuance of common stock for Employee Stock Purchase Plan 0.1 — 14.3 — — — 14.3

Purchases of treasury stock, including excise tax — — — — — 0.2 0.2

Conversions of 2023 Notes 10.6 — ( 0.4 ) — — — ( 0.4 )

Benefit of note hedge upon conversions of 2023 Notes ( 10.5 ) — 1,296.1 — — ( 1,296.1 ) —

Share-based compensation expense — — 39.0 — — — 39.0

Net income — — — — 120.7 — 120.7

Other comprehensive loss, net of tax — — — ( 6.3 ) — — ( 6.3 )

Balance at September 30, 2023 386.4 $ 0.4 $ 3,618.0 $ ( 35.6 ) $ 765.1 $ ( 2,080.0 ) $ 2,267.9

Three Months Ended September 30, 2022

(In millions) Common Stock Additional

Capital Accumulated Other Comprehensive Loss Retained Earnings Treasury Stock Total

Stockholders’

Shares Amount

Balance at June 30, 2022 392.6 $ 0.4 $ 2,028.9 $ ( 23.0 ) $ 286.9 $ ( 37.3 ) $ 2,255.9

Issuance of common stock for Employee Stock Purchase Plan 0.2 — 12.4 — — — 12.4

Purchases of treasury stock ( 6.6 ) — — — — ( 557.7 ) ( 557.7 )

Share-based compensation expense — — 30.8 — — — 30.8

Net income — — — — 101.2 — 101.2

Other comprehensive loss, net of tax — — — ( 18.1 ) — — ( 18.1 )

Balance at September 30, 2022 386.2 $ 0.4 $ 2,072.1 $ ( 41.1 ) $ 388.1 $ ( 595.0 ) $ 1,824.5

See accompanying notes

Consolidated Statements of Stockholders’ Equity

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2024

(In millions) Common Stock Additional

5 unchanged sentences

Issuance of common stock for Employee Stock Purchase Plan 0.1 — 13.4 — — — 13.4

Purchases of treasury stock, including excise tax ( 1.6 ) — — — — ( 188.9 ) ( 188.9 )

Conversions of 2023 Notes 10.6 — ( 0.4 ) — — — ( 0.4 )

Benefit of note hedge upon conversions of 2023 Notes ( 10.5 ) — 1,296.1 — — ( 1,296.1 ) —

Purchase of capped call transactions, net of tax — — ( 76.3 ) — — — ( 76.3 )

Issuance of common stock in connection with achievement of sales-based milestone, net of issuance costs 1.5 — ( 188.1 ) — — 188.1 —

Exercise and settlement of warrants 7.9 — ( 868.3 ) — — 868.3 —

Share-based compensation expense — — 39.0 — — — 39.0

1 unchanged sentence

Other comprehensive loss, net of tax — — — ( 20.6 ) — — ( 20.6 )

Balance at September 30, 2023 386.4 $ 0.4 $ 3,618.0 $ ( 35.6 ) $ 765.1 $ ( 2,080.0 ) $ 2,267.9

Nine Months Ended September 30, 2022

Balance at March 31, 2024 396.1 $ 0.4 $ 2,510.6 $ ( 37.3 ) $ 1,167.8 $ ( 1,394.7 ) $ 2,246.8

Three Months Ended March 31, 2023

(In millions) Common Stock Additional

Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Treasury Stock Total

Capital Accumulated Other Comprehensive Loss Retained Earnings Treasury Stock Total

Stockholders’

3 unchanged sentences

Issuance of common stock for Employee Stock Purchase Plan 0.2 — 12.3 — — — 12.3

Issuance of common stock in connection with achievement of regulatory approval milestone, net of issuance costs 2.9 — ( 189.3 ) — — 189.2 ( 0.1 )

Purchases of treasury stock ( 6.6 ) — — — — ( 557.7 ) ( 557.7 )

Conversions of 2023 Notes 0.4 — 4.2 — — 13.2 17.4

Benefit of note hedge upon conversions of 2023 Notes ( 0.3 ) — 33.5 — — ( 33.5 ) —

Share-based compensation expense — — 35.2 — — — 35.2

Net income — — — — 48.6 — 48.6

Other comprehensive loss, net of tax — — — ( 41.6 ) — — ( 41.6 )

Balance at September 30, 2022 386.2 $ 0.4 $ 2,072.1 $ ( 41.1 ) $ 388.1 $ ( 595.0 ) $ 1,824.5

Other comprehensive income, net of tax — — — 5.1 — — 5.1

Balance at March 31, 2023 387.6 $ 0.4 $ 2,305.6 $ ( 6.5 ) $ 528.5 $ ( 595.0 ) $ 2,233.0

See accompanying notes

Consolidated Statements of Cash Flows

Nine Months Ended

September 30,

Three Months Ended

(In millions) 2024 2023

5 unchanged sentences

Non-cash interest expense 1.9 1.5

Realized (gain) loss on equity investment ( 1.0 ) ( 0.2 )

Deferred income taxes ( 41.8 ) ( 9.3 )

13 unchanged sentences

Purchases of property and equipment ( 56.9 ) ( 74.7 )

Acquisitions, net of cash acquired — ( 3.9 )

Other investing activities 2.3 —

Net cash used in investing activities ( 922.1 ) ( 327.4 )

Net cash provided by (used in) investing activities 74.8 ( 186.7 )

Financing activities

Net proceeds from issuance of common stock 13.4 12.3

Purchases of treasury stock ( 188.7 ) ( 557.7 )

Proceeds from issuance of senior convertible notes, net of issuance costs 1,230.6 —

Purchases of capped call transactions ( 101.3 ) —

Payments for conversions of senior convertible notes

Other financing activities ( 8.7 ) ( 1.1 )

Net cash provided by (used in) financing activities 313.3 ( 551.5 )

Net cash provided by financing activities 4.7 11.2

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 3.8 ) 1.1

7 unchanged sentences

Supplemental disclosure of non-cash investing and financing transactions:

Shares issued for conversions of 2023 Notes $ 1,316.4 $ 35.9

Shares received under note hedge upon conversion of 2023 Notes $ ( 1,296.1 ) $ ( 33.5 )

Acquisition of property and equipment included in accounts payable and accrued liabilities $ 40.7 $ 55.8

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Organization and Business

is a medical device company that develops and markets continuous glucose monitoring, or CGM, systems for the management of diabetes by patients, caregivers, and clinicians around the world.

We are a medical device company primarily focused on the design, development and commercialization of continuous glucose monitoring, or CGM, systems for the management of diabetes by patients, caregivers, and clinicians around the world.

Unless the context requires otherwise, the terms “we,” “us,” “our,” the “company,” or “Dexcom” refer to DexCom, Inc.

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In the opinion of management, all adjustments, which include only normal recurring adjustments considered necessary for a fair presentation, have been included.

Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto for the year ended December 31, 2022 included in the Annual Report on Form 10-K that we filed with the SEC on February 9, 2023.

Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2024.

These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto for the fiscal year ended December 31, 2023 included in the Annual Report on Form 10-K that we filed with the SEC on February 8, 2024.

These consolidated financial statements include the accounts of DexCom, Inc.

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We have reclassified certain amounts previously reported in our financial statements to conform to the current presentation.

On June 10, 2022, the Company effected a four -for-one forward stock split of its common stock to shareholders of record as of May 19, 2022.

The par value of the common stock remains $ 0.001 per share.

Accordingly, an amount equal to the par value of the increased shares resulting from the stock split was reclassified from “Additional paid-in capital” to “Common stock.” All share and per share information has been retroactively adjusted to reflect the stock split for all periods presented.

We determine the functional currencies of our international subsidiaries by reviewing the environment where each subsidiary primarily generates and expends cash.

3 unchanged sentences

We record gains and losses resulting from transactions with customers and vendors that are denominated in currencies other than the functional currency and from certain intercompany transactions in other income (expense), net in our consolidated statements of operations.

We expect that the revenue we generate from the sales of our products will fluctuate from quarter to quarter.

We typically experience seasonality, with lower sales in the first quarter of each year compared to the immediately preceding fourth quarter.

This seasonal sales pattern relates to U.S.

annual insurance deductible resets and unfunded flexible spending accounts.

Significant Accounting Policies

There were no material changes to our significant accounting policies as described in Note 1 to the financial statements in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 during the nine months ended September 30, 2023 .

There were no material changes to our significant accounting policies as described in Note 1 “ Organization and Significant Accounting Policies ” to the financial statements in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 during the three months ended March 31, 2024 .

Use of Estimates

11 unchanged sentences

Payment terms vary by contract type and type of customer and generally range from 30 to 90 days.

Accounts receivable as of September 30, 2023 included unbilled accounts receivable of $ 8.8 million.

Accounts receivable as of March 31, 2024 included unbilled accounts receivable of $ 10.1 million.

We expect to invoice and collect all unbilled accounts receivable within twelve months.

1 unchanged sentence

Our performance obligations are generally satisfied within twelve months of the initial contract date.

The deferred revenue balances related to performance obligations that will be satisfied after twelve months was $ 21.3 million as of September 30, 2023 and $ 19.0 million as of December 31, 2022.

The deferred revenue balances related to performance obligations that will be satisfied after twelve months were $ 7.4 million as of March 31, 2024 and December 31, 2023.

These balances are included in other long-term liabilities in our consolidated balance sheets.

3 unchanged sentences

Diluted net income per share is computed using the weighted average number of common shares outstanding during the period and, when dilutive, potential common share equivalents.

Potentially dilutive common shares consist of shares issuable from restricted stock units, or RSUs, performance stock units, or PSUs, warrants, and our senior convertible notes.

Potentially dilutive common shares consist of shares issuable from restricted stock units, or RSUs, performance stock units, or PSUs, warrants, our senior convertible notes, and collaborative sales-based milestones.

Potentially dilutive common shares issuable upon vesting of RSUs, PSUs, and exercise of warrants are determined using the average share price for each period under the treasury stock method.

3 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(In millions, except per share data) 2024 2023

6 unchanged sentences

Basic weighted average shares outstanding 390.2 386.7

Dilutive potential common stock outstanding:

Restricted stock units and performance stock units 1.0 0.5 1.1 0.9

Warrants 11.6 8.6 11.8 9.8

Dilutive potential securities:

Collaborative sales-based milestones

RSUs and PSUs

Senior convertible notes 15.7 18.9

Warrants 8.8 11.6

Diluted weighted average shares outstanding 416.7 418.5

Outstanding anti-dilutive securities not included in the diluted net income per share attributable to common stockholders calculations were as follows:

Outstanding anti-dilutive securities not included in the calculations of diluted net income per share attributable to common stockholders were as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

(In millions) 2024 2023

Restricted stock units and performance stock units — 1.3 — 0.5

RSUs and PSUs

Senior convertible notes — 8.0

Total 0.4 8.1

Recent Accounting Guidance

Recently Adopted Accounting Pronouncements

In October 2021, the FASB issued ASU No.

2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.

This guidance is intended improve the accounting for acquired revenue contracts with customers in a business combination.

The new guidance requires that the acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606.

ASU 2021-08 is effective for public business entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and early adoption is permitted.

The amendments should be applied prospectively to business combinations occurring on or after the adoption date.

We adopted ASU 2021-08 in the first quarter of 2023 and there was no impact to our consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

We do not expect any recently issued accounting pronouncements will have a material effect on our consolidated financial statements .

Recently Issued Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures .

The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly reviewed by the chief operating decision maker, or CODM, and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets.

The ASU also allows, in addition to the measure that is most consistent with U.S.

GAAP, the disclosure of additional measures of segment profit or loss that are used by the CODM in assessing segment performance and deciding how to allocate resources.

All disclosure requirements under ASU 2023-07 are also required for public entities with a single reportable segment.

The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, on a retrospective basis, with early adoption permitted.

We are currently evaluating the impact of this standard on our disclosures.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures .

The ASU requires greater disaggregation of information about a reporting entity's effective tax rate reconciliation as well as information on income taxes paid.

The ASU applies to all entities subject to income taxes and is intended to help investors better understand an entity’s exposure to potential changes in jurisdictional tax legislation and assess income tax information that affects cash flow forecasts and capital allocation decisions.

The ASU is effective for annual periods beginning after December 15, 2024, with early adoption permitted.

The ASU should be applied on a prospective basis although retrospective application is permitted.

We are currently evaluating the impact of this standard on our disclosures.

On March 6, 2024, the SEC adopted SEC Release Nos.

34-99678, The Enhancement and Standardization of Climate-Related Disclosures for Investor, to require the disclosure of certain climate-related information in registration statements and annual reports, including Scope 1 and 2 emissions and information about climate-related risks that have materially impacted, or are reasonably likely to have a material impact on, a company’s business strategy, results of operations, or financial condition.

In addition, under the final rules, certain disclosures related to severe weather events and other natural conditions will be required in audited financial statements.

The disclosure requirements will begin phasing in for our reports and registration statements including financial information in the fiscal year ending December 31, 2025.

On April 4, 2024, the SEC issued an order staying the final rules until the completion of judicial review.

We are currently evaluating the impact of this final rule on our disclosures.

Development and Other Agreements

2 unchanged sentences

This replaced our original Collaboration and License Agreement with Verily dated August 10, 2015, as amended in October 2016, including the royalty obligations provisions under that original agreement.

Pursuant to the Restated Collaboration Agreement, we and Verily have agreed to continue to jointly develop a certain next-generation CGM product, and potentially one or more additional CGM products, for which we will have exclusive commercialization rights.

Pursuant to the Restated Collaboration Agreement, we and Verily agreed to jointly develop a certain next-generation CGM product, and potentially additional CGM products, for which we will have exclusive commercialization rights.

The Restated Collaboration Agreement also provides us with an exclusive license to use intellectual property of Verily resulting from the collaboration, and certain Verily patents, in the development, manufacture and commercialization of blood-based or interstitial glucose monitoring products more generally (subject to certain exclusions, which are outside of the CGM field as it is commonly understood).

It also provides us with non-exclusive license rights under Verily’s other intellectual property rights to develop, manufacture and commercialize those kinds of glucose monitoring products and certain CGM-product companion software functionalities.

The Restated Collaboration Agreement requires us to use commercially reasonable efforts to develop, launch and commercialize the CGM product(s) that are the subject of the collaboration according to certain timing and other objectives, and provides for one executive sponsor from each of Dexcom and Verily to meet periodically and make decisions related to the collaboration (within a limited scope of authority) by consensus.

In consideration of Verily’s performance of its obligations under the joint development plan of the Restated Collaboration Agreement, the licenses granted to us and the amendment of the original agreement, we made upfront, incentive, and the product regulatory approval payments, and will make potential payments for contingent sales-based milestones upon the achievement of certain revenue targets.

In connection with the Restated Collaboration Agreement, we developed, launched and commercialized a CGM product in connection with the collaboration.

In consideration of Verily’s performance of its obligations under the joint development plan of the Restated Collaboration Agreement, the licenses granted to us and the amendment of the original agreement, we made upfront, incentive, and the product regulatory approval payments, and payments for contingent sales-based milestones upon the achievement of certain revenue targets.

We account for the contingent milestones payable in shares of our common stock as equity instruments within the scope of ASC Topic 718.

2 unchanged sentences

Upfront and Incentive payments

In the fourth quarter of 2018, we made an initial payment for an upfront fee of $ 250.0 million through the issuance of 7,363,772 shares of our common stock.

In the fourth quarter of 2018, we made an initial payment for an upfront fee of $ 250.0 million through the issuance of 7.4 million shares of our common stock.

We recorded a $ 217.7 million charge in our consolidated statements of operations during 2018 relating to the issuance of this common stock because this milestone payment did not meet the capitalization criteria.

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In the fourth quarter of 2021, we determined the achievement of the regulatory approval milestone to be probable and recorded an $ 87.1 million research and development charge in our consolidated statements of operations.

This charge is associated with IPR&D obtained in an asset acquisition prior to regulatory approval and therefore does not have an alternative future use.

In the first quarter of 2022, we received regulatory approval and issued 2,945,508 shares of our common stock in connection with our achievement of the related milestone.

In the fourth quarter of 2022, we received FDA approval and determined the achievement of the sales-based milestones to be probable.

This charge is associated with in-process research and development obtained in an asset acquisition prior to regulatory approval and therefore does not have an alternative future use.

In the first quarter of 2022, we received regulatory approval and issued 2.9 million shares of our common stock in connection with our achievement of the related milestone.

In the fourth quarter of 2022, we received approval from the Food and Drug Administration and determined the achievement of the sales-based milestones to be probable.

As such, we capitalized the full value of the sales-based milestones, $ 152.4 million, as an intangible asset.

1 unchanged sentence

The value of the sales-based milestones is based on:

1) 5,154,640 shares of our common stock, as agreed upon in November 2018 and 2) our closing stock price on December 28, 2018 of $ 29.57 per share.

1) 5.2 million shares of our common stock, as agreed upon in November 2018 and 2) our closing stock price on December 28, 2018 of $ 29.57 per share.

December 28, 2018 is the date on which we obtained the necessary regulatory approvals and represents the date the performance-based awards were issued.

The intangible asset will be amortized using the straight-line method over its estimated useful

life of 64 months through March 2028.

The intangible asset will be amortized using the straight-line method over its estimated useful life of 64 months through March 2028.

The related amortization expense is recognized in cost of sales in our consolidated statements of operations.

All milestones may be paid in cash or shares of our common stock, at our election.

If we elect to make these milestone payments in cash, any such cash payment would be equal to the number of shares that would otherwise be issued for the given milestone payment multiplied by the value of our stock on the date the relevant milestone is achieved, and adjusted to give effect to any stock splits, dividends, or similar events.

We intend to pay the sales-based contingent milestones in shares of our common stock.

The Restated Collaboration Agreement will continue until December 31, 2028, unless terminated by either party upon uncured material breach of the Restated Collaboration Agreement by the other party.

Upon achievement of the first sales-based milestone event and payment of the corresponding milestone fee by us, the term of the Restated Collaboration Agreement will be extended until December 31, 2033, unless terminated by either party upon uncured material breach of the Restated Collaboration Agreement by the other party.

In the fourth quarter of 2023, we issued 3.7 million shares of our common stock in connection with our achievement of the first sales-based milestone.

In the first quarter of 2024, we issued 1.5 million shares of our common stock in connection with our achievement of the second sales-based milestone.

All milestones were paid in cash or shares of our common stock, at our election.

Fair Value Measurements

4 unchanged sentences

We validate the quoted market prices provided by our primary pricing service by comparing the fair values of our Level 2 marketable securities portfolio balance provided by our primary pricing service against the fair values provided by our investment managers.

The following table summarizes financial assets that we measured at fair value on a recurring basis as of September 30, 2023, classified in accordance with the fair value hierarchy:

The following table summarizes financial assets that we measured at fair value on a recurring basis as of March 31, 2024, classified in accordance with the fair value hierarchy:

Fair Value Measurements Using

10 unchanged sentences

Total assets measured at fair value on a recurring basis $ 537.5 $ 2,059.1 $ — $ 2,596.6

(1) Includes debt obligations issued by U.S.

government-sponsored enterprises or U.S.

government agencies.

(2) Includes assets which are held pursuant to a deferred compensation plan for senior management, which consist mainly of mutual funds.

The following table summarizes financial assets that we measured at fair value on a recurring basis as of December 31, 2023, classified in accordance with the fair value hierarchy:

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(2) Includes assets which are held pursuant to a deferred compensation plan for senior management, which consist mainly of mutual funds.

There were no transfers into or out of Level 3 securities during the three and nine months ended September 30, 2023 and September 30, 2022.

There were no transfers into or out of Level 3 securities during the three months ended March 31, 2024 and March 31, 2023.

Fair Value of Senior Convertible Notes

1 unchanged sentence

Fair Value Measurements Using Level 1

(In millions) September 30, 2023 December 31, 2022

Senior Convertible Notes due 2023 $ 281.3 $ 2,136.2

(In millions) March 31, 2024 December 31, 2023

Senior Convertible Notes due 2025 1,327.8 1,262.8

1 unchanged sentence

Total fair value of outstanding senior convertible notes $ 2,668.8 $ 2,544.6

For more information on the carrying values of our senior convertible notes, see Senior Convertible Notes in Note 5 “Debt” to the consolidated financial statements.

See Note 5 “ Debt—Senior Convertible Notes ” to the consolidated financial statements in Part I, Item I of this Quarterly Report on Form 10-Q for more information regarding the carrying values of our senior convertible notes.

Foreign Currency and Derivative Financial Instruments

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The derivative gains and losses are included in other income (expense), net in our consolidated statements of operations.

As of September 30, 2023 and December 31, 2022, the notional amounts of outstanding foreign currency forward contracts were $ 89.0 million and $ 62.0 million, respectively.

The resulting impact on our consolidated financial statements from currency hedging activities was not significant for the three and nine months ended September 30, 2023 and September 30, 2022.

As of March 31, 2024 and December 31, 2023, the notional amounts of outstanding foreign currency forward contracts were $ 80.0 million and $ 71.0 million, respectively.

The resulting impact on our consolidated financial statements from currency hedging activities was not significant for the three months ended March 31, 2024 and March 31, 2023.

Our foreign currency exposures vary but are primarily concentrated in the Australian Dollar, the British Pound, the Canadian Dollar, the Euro, and the Malaysian Ringgit.

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We hold certain other investments that we do not measure at fair value on a recurring basis.

The carrying values of these investments are $ 38.5 million as of September 30, 2023 and $ 19.0 million as of December 31, 2022.

The carrying values of these investments are $ 39.8 million as of March 31, 2024 and $ 38.5 million as of December 31, 2023.

We include them in other assets in our consolidated balance sheets.

1 unchanged sentence

We monitor the information that becomes available from time to time and adjust the carrying values of these investments if there are identified events or changes in circumstances that have a significant effect on the fair values.

There were no significant impairment losses during the three and nine months ended September 30, 2023 and September 30, 2022.

There were no significant impairment losses during the three months ended March 31, 2024 and March 31, 2023.

Balance Sheet Details and Other Financial Information

1 unchanged sentence

Short-term marketable securities, consisting of available-for-sale debt securities, were as follows as of the dates indicated:

September 30, 2023

March 31, 2024

(In millions) Amortized

6 unchanged sentences

Total debt securities, available-for-sale $ 2,047.2 $ 0.4 $ ( 1.8 ) $ 2,045.8

(1) Includes debt obligations issued by U.S.

government-sponsored enterprises or U.S.

government agencies.

December 31, 2023

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government agencies.

As of September 30, 2023, the estimated market value of our short-term debt securities with contractual maturities up to 12 months was $ 2.60 billion.

As of March 31, 2024, the estimated market value of our short-term debt securities with contractual maturities up to 12 months and up to 18 months was $ 1.77 billion and $ 275.6 million, respectively.

As of December 31, 2023, the estimated market value of our short-term debt securities with contractual maturities up to 12 months was $ 2.16 billion.

Gross realized gains and losses on sales of our short-term debt securities for the three and nine months ended September 30, 2023 and September 30, 2022 were not significant.

Gross realized gains and losses on sales of our short-term debt securities for the three months ended March 31, 2024 and March 31, 2023 were not significant.

We periodically review our portfolio of debt securities to determine if any investment is impaired due to credit loss or other potential valuation concerns.

For debt securities where the fair value of the investment is less than the amortized cost basis, we have assessed at the individual security level for various quantitative factors including, but not limited to, the nature of the investments, changes in credit ratings, interest rate fluctuations, industry analyst

reports, and the severity of impairment.

Unrealized losses on available-for-sale debt securities at September 30, 2023 were primarily due to increases in interest rates, including market credit spreads, and not due to increased credit risks associated with specific securities.

Unrealized losses on available-for-sale debt securities at March 31, 2024 were primarily due to increases in interest rates, including market credit spreads, and not due to increased credit risks associated with specific securities.

Accordingly, we have not recorded an allowance for credit losses.

We do not intend to sell these investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity.

(In millions) September 30, 2023 December 31, 2022

(In millions) March 31, 2024 December 31, 2023

Raw materials $ 301.2 $ 319.5

3 unchanged sentences

Prepaid and Other Current Assets

(In millions) September 30, 2023 December 31, 2022

(In millions) March 31, 2024 December 31, 2023

Prepaid expenses $ 59.4 $ 58.7

5 unchanged sentences

Property and Equipment

(In millions) September 30, 2023 December 31, 2022

(In millions) March 31, 2024 December 31, 2023

Land and land improvements $ 43.2 $ 34.5

6 unchanged sentences

Total cost 1,657.6 1,622.5

Less accumulated depreciation and amortization ( 466.3 ) ( 363.2 )

accumulated depreciation and amortization

( 549.0 ) ( 509.4 )

Total property and equipment, net $ 1,108.6 $ 1,113.1

(In millions) September 30, 2023 December 31, 2022

(In millions) March 31, 2024 December 31, 2023

Long-term investments $ 39.8 $ 38.5

4 unchanged sentences

(In millions)

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Accounts payable trade $ 269.7 $ 276.4

2 unchanged sentences

Accrued warranty 7.2 12.6

Income tax payable

Deferred compensation plan liabilities 18.3 15.2

2 unchanged sentences

Accrued Payroll and Related Expenses

(In millions) September 30, 2023 December 31, 2022

(In millions) March 31, 2024 December 31, 2023

Accrued wages, bonus and taxes $ 81.3 $ 139.8

2 unchanged sentences

Other Long-Term Liabilities

(In millions) September 30, 2023 December 31, 2022

(In millions) March 31, 2024 December 31, 2023

Finance lease obligations

1 unchanged sentence

Deferred revenue, long-term 7.4 7.4

Deferred tax liabilities 4.6 4.9

Asset retirement obligation 15.9 15.7

Other tax liabilities 43.7 38.7

3 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(In millions) 2024 2023

9 unchanged sentences

The carrying amounts of our senior convertible notes were as follows as of the dates indicated:

(In millions) September 30, 2023 December 31, 2022

(In millions) March 31, 2024 December 31, 2023

Principal amount:

1 unchanged sentence

Senior Convertible Notes due 2028 1,250.0 1,250.0

Senior Convertible Notes due 2028 1,250.0 —

Total principal amount 2,457.5 2,457.5

2 unchanged sentences

For our senior convertible notes for which the if-converted value exceeded the principal amount, the amount in excess of principal was as follows as of the dates indicated:

(In millions) September 30, 2023 December 31, 2022

Senior Convertible Notes due 2023 $ 158.1 $ 1,361.5

(In millions) March 31, 2024 December 31, 2023

Senior Convertible Notes due 2025 105.4 56.1

2 unchanged sentences

$ 209.2 $ 89.7

The following table summarizes the components of interest expense and the effective interest rates for each of our senior convertible notes for the periods shown:

The following table summarizes the components of interest expense and the effective interest rates for our senior convertible notes for the periods shown:

Three Months Ended

September 30, Nine Months Ended

September 30,

(In millions) 2024 2023

1 unchanged sentence

Contractual coupon interest (1)

$ 1.8 $ 2.3 $ 7.0 $ 6.7

Non-cash interest expense:

5 unchanged sentences

Senior Convertible Notes due 2028 0.7 % *

(1) Interest on the 2023 Notes began accruing upon issuance and is payable semi-annually on June 1 and December 1 of each year.

Interest on the 2025 Notes began accruing upon issuance and is payable semi-annually on May 15 and November 15 of each year.

Interest on the 2028 Notes began accruing upon issuance and is payable semi-annually on May 15 and November 15 of each year.

(1) Interest on our unsecured senior convertible notes due 2023, or the 2023 Notes, began accruing upon issuance and was payable semi-annually on June 1 and December 1 of each year until the 2023 Notes matured on December 1, 2023.

Interest on our unsecured senior convertible notes due 2025, or the 2025 Notes, began accruing upon issuance and is payable semi-annually on May 15 and November 15 of each year.

Interest on our unsecured senior convertible notes due 2028, or the 2028 Notes, began accruing upon issuance and is payable semi-annually on May 15 and November 15 of each year.

(2) The effective interest rate presented represents the rate applicable for the period outstanding.

The 2023 Notes matured on December 1, 2023 and are no longer outstanding.

* Not applicable as no notes were outstanding at this date.

0.75 % Senior Convertible Notes due 2023

In November 2018, we completed an offering of $ 850.0 million aggregate principal amount of unsecured senior convertible notes with a stated interest rate of 0.75 % and a maturity date of December 1, 2023 (the “2023 Notes”).

The net proceeds from the offering, after deducting initial purchasers’ discounts and costs directly related to the offering, were approximately $ 836.6 million.

The initial conversion rate of the 2023 Notes is 24.3476 shares per $1,000 principal amount of notes, which is equivalent to a conversion price of approximately $ 41.07 per share, subject to adjustments.

We entered into transactions for a convertible note hedge (the “2023 Note Hedge”) and

warrants (the “2023 Warrants”) concurrently with the issuance of the 2023 Notes.

The 2023 Notes may be settled in cash, stock, or a combination thereof, solely at our discretion.

We use the if-converted method for assumed conversion of the 2023 Notes to compute the weighted average shares of common stock outstanding for diluted earnings per share.

No principal payments are due on the 2023 Notes prior to maturity.

Other than restrictions relating to certain fundamental changes and consolidations, mergers or asset sales and customary anti-dilution adjustments, the indenture relating to the 2023 Notes includes customary terms and covenants, including certain events of default after which the 2023 Notes may be due and payable immediately.

For the twelve months ended December 31, 2022, holders of $ 17.5 million in aggregate principal amount of the 2023 Notes elected conversion at their option.

We settled these conversions using treasury stock.

We issued 425,552 shares to settle the converted 2023 Notes.

We received 287,492 shares of common stock from the exercise of a portion of the 2023 Note Hedge that we purchased concurrently with the issuance of the 2023 Notes, as described below.

For the three and nine months ended September 30, 2023, we settled $ 650.5 million in aggregate principal amount of the 2023 Notes through a combination of $ 650.5 million in cash for the principal amount and 10,599,907 shares of common stock for the amount in excess of the principal amount.

We received 10,585,850 shares of common stock from the exercise of a portion of the 2023 Note Hedge that we purchased concurrently with the issuance of the 2023 Notes, as described below.

The remaining outstanding principal of $ 124.3 million as of September 30, 2023 and any amount in excess of the principal amount will settle on or before the maturity date of December 1, 2023.

Conversion Rights at the Option of the Holders

Holders of the 2023 Notes have the right to require us to repurchase for cash all or a portion of their notes at 100 % of their principal amount, plus any accrued and unpaid interest, upon the occurrence of a fundamental change (as defined in the indenture relating to the notes).

We will also be required to increase the conversion rate for holders who convert their 2023 Notes in connection with certain fundamental changes occurring prior to the maturity date or following the delivery by Dexcom of a notice of redemption.

Holders of the 2023 Notes had the ability to convert all or a portion of their notes at their option prior to 5:00 p.m., New York City time, on the business day immediately preceding September 1, 2023, in multiples of $1,000 principal amount, only under the following circumstances:

(1) during any calendar quarter commencing after March 31, 2019 (and only during such calendar quarter), if the last reported sale price of Dexcom’s common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the applicable conversion price of the 2023 Notes on each such trading day;

(2) during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the 2023 Notes for each day of that five -day consecutive trading day period was less than 98 % of the product of the last reported sale price of Dexcom’s common stock and the applicable conversion rate of the 2023 Notes on such trading day;

(3) if we call any or all of the 2023 Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date;

(4) upon the occurrence of specified corporate transactions.

Circumstance (1) listed above occurred during the quarters ended December 31, 2022, March 31, 2023, and June 30, 2023.

As a result, the 2023 Notes were convertible at the option of the holder from January 1, 2023 through August 31, 2023.

On or after September 1, 2023, until 5:00 p.m., New York City time, on the second scheduled trading day immediately preceding the maturity date, holders of the 2023 Notes may convert all or a portion of their notes regardless of the foregoing circumstances.

See above for a description of conversion activity related to the 2023 Notes.

Conversion Rights at Our Option

Dexcom did not have a right to redeem the 2023 Notes prior to December 1, 2021.

On or after December 1, 2021 and prior to September 1, 2023, Dexcom was permitted to redeem for cash all or part of the 2023 Notes, at its option, if the last reported sale price of our common stock has been at least 130 % of the conversion price then in

effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which Dexcom provides notice of redemption.

The redemption price was equal to 100 % of the principal amount of the 2023 Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date.

Convertible Debt Summary

The following table summarizes the key details for the 2023 Notes, 2025 Notes, and 2028 Notes:

Senior Convertible Notes

Offering Completion Date

Maturity Date

Stated Interest Rate

Aggregate Principal Amount Issued

Net Proceeds (1)

Initial Conversion Rate (2)

(per $1,000 principal amount)

Conversion Price

Settlement Methods (3)

2023 Notes (4)

November 2018

December 1, 2023

$ 850.0 million

$ 836.6 million

24.3476 shares

Cash and/or shares

November 15, 2025

$ 1.21 billion

$ 1.19 billion

6.6620 shares

Cash and/or shares

$ 1.25 billion

$ 1.23 billion

6.1571 shares

Cash and/or shares

(1) Net proceeds is calculated by deducting the initial purchasers’ discounts and estimated costs directly related to the offering from the aggregate principal amount of the applicable series of notes.

(2) Subject to adjustments as defined in the applicable indentures.

(3) The 2025 Notes and 2028 Notes may be settled in cash, stock, or a combination thereof, solely at our discretion.

The 2023 Notes, while outstanding, could be settled in cash, stock, or a combination thereof, solely at our discretion.

(4) The 2023 Notes matured on December 1, 2023 and are no longer outstanding.

We use the if-converted method for assumed conversion of our senior convertible notes to compute the weighted average shares of common stock outstanding for diluted earnings per share.

No principal payments are due on the senior convertible notes prior to maturity.

Other than restrictions relating to certain fundamental changes and consolidations, mergers or asset sales and customary anti-dilution adjustments, the indenture relating to our senior convertible notes include customary terms and covenants, including certain events of default after which the senior convertible notes may be due and payable immediately.

2023 Note Hedge

In connection with the offering of the 2023 Notes, in November 2018 we entered into convertible note hedge transactions with two of the initial purchasers of the 2023 Notes (the “2023 Counterparties”) entitling us to purchase up to 20.7 million shares of our common stock at an initial price of $ 41.07 per share, each of which is subject to adjustment.

The cost of the 2023 Note Hedge was $ 218.9 million and we accounted for it as an equity instrument by recognizing $ 218.9 million in additional paid-in capital during 2018.

The 2023 Note Hedge will expire on December 1, 2023.

The 2023 Note Hedge is expected to reduce the potential equity dilution upon any conversion of the 2023 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted 2023 Notes if the daily volume-weighted average price per share of our common stock exceeds the strike price of the 2023 Note Hedge.

The strike price of the 2023 Note Hedge initially corresponds to the conversion price of the 2023 Notes and is subject to certain adjustments under the terms of the 2023 Note Hedge.

An assumed exercise of the 2023 Note Hedge by us is considered anti-dilutive since the effect of the inclusion would always be anti-dilutive with respect to the calculation of diluted earnings per share.

See above for a description of conversion activity related to the 2023 Notes and shares received as the result of exercising a portion of the 2023 Note Hedge.

In connection with the offering of the 2023 Notes, in November 2018 we entered into convertible note hedge transactions, or the 2023 Note Hedge, with two of the initial purchasers of the 2023 Notes, which we refer to as the 2023 Counterparties, entitling us to purchase up to 20.7 million shares of our common stock.

The 2023 Note Hedge expired on December 1, 2023.

See below for a description of conversion activity related to the 2023 Notes and shares received as the result of exercising the remaining portion of the 2023 Note Hedge in 2023.

2023 Warrants

In November 2018, we also sold warrants to the 2023 Counterparties to acquire up to 20.7 million shares of our common stock.

In November 2018, we also sold warrants, or the 2023 Warrants, to the 2023 Counterparties to acquire up to 20.7 million shares of our common stock.

The 2023 Warrants require net share settlement and a pro-rated number of warrants will expire on each of the 60 scheduled trading days starting on March 1, 2024.

1 unchanged sentence

The 2023 Warrants could have a dilutive effect on our earnings per share to the extent that the price of our common stock during a given measurement period exceeds the strike price of the 2023 Warrants.

The strike price of the 2023 Warrants is initially $ 49.60 per share and is subject to certain adjustments under the terms of the warrant agreements.

The strike price of the 2023 Warrants was initially $ 49.60 per share, subject to certain adjustments under the terms of the warrant agreements.

We use the treasury share method for assumed conversion of the 2023 Warrants when computing the weighted average common shares outstanding for diluted earnings per share.

0.25 % Senior Convertible Notes due 2025

In May 2020, we completed an offering of $ 1.21 billion aggregate principal amount of unsecured senior convertible notes with a stated interest rate of 0.25 % and a maturity date of November 15, 2025 (the “2025 Notes”).

The net proceeds from the offering, after deducting initial purchasers’ discounts and estimated costs directly related to the offering, were approximately $ 1.19 billion.

The initial conversion rate of the 2025 Notes is 6.6620 shares per $1,000 principal amount of notes, which is equivalent to a conversion price of approximately $ 150.11 per share, subject to adjustments.

The 2025 Notes may be settled in cash, stock, or a combination thereof, solely at our discretion.

We use the if-converted method for assumed conversion of the 2025 Notes to compute the weighted average shares of common stock outstanding for diluted earnings per share.

No principal payments are due on the 2025 Notes prior to maturity.

Other than restrictions relating to certain fundamental changes and consolidations, mergers or asset sales and customary anti-dilution adjustments, the indenture relating to the 2025 Notes includes customary terms and covenants, including certain events of default after which the 2025 Notes may be due and payable immediately.

Conversion Rights at the Option of the Holders

In the event of a fundamental change (as defined in the indenture related to the 2025 Notes), holders of the 2025 Notes have the right to require us to repurchase for cash all or a portion of their notes at a price equal to 100 % of the principal amount of the 2025 Notes, plus any accrued and unpaid interest.

Holders of the 2025 Notes who convert their notes in connection with a make-whole fundamental change (as defined in the indenture) or following the delivery by Dexcom of a notice of redemption are, under certain circumstances, entitled to an increase in the conversion rate.

Prior to 5:00 p.m., New York City time, on the business day immediately preceding August 15, 2025, holders of the 2025 Notes may convert all or a portion of their notes, in multiples of $1,000 principal amount, only under the following circumstances:

(1) during any calendar quarter commencing after September 30, 2020 (and only during such calendar quarter), if the last reported sale price of Dexcom’s common stock for at least 20 trading days (whether or

not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the applicable conversion price of the Notes on each such trading day;

(2) during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the Notes for each day of that five day consecutive trading day period was less than 98 % of the product of the last reported sale price of Dexcom’s common stock and the applicable conversion rate of the Notes on such trading day;

(3) if we call any or all of the Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date;

(4) upon the occurrence of specified corporate transactions.

On or after August 15, 2025, until 5:00 p.m., New York City time, on the business day immediately preceding the maturity date, holders of the 2025 Notes may convert all or a portion of their notes regardless of the foregoing circumstances.

Conversion Rights at Our Option

Dexcom was not permitted to redeem the 2025 Notes prior to May 20, 2023.

On or after May 20, 2023 and prior to August 15, 2025, Dexcom may redeem for cash all or part of the 2025 Notes, at its option, if the last reported sale price of our common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which Dexcom provides notice of redemption.

The redemption price will be equal to 100 % of the principal amount of the 2025 Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date.

0.375 % Senior Convertible Notes due 2028

In May 2023, we completed an offering of $ 1.25 billion aggregate principal amount of unsecured senior convertible notes with a stated interest rate of 0.375 % and a maturity date of May 15, 2028 (the “2028 Notes”).

The net proceeds from the offering, after deducting initial purchasers’ discounts and estimated costs directly related to the offering, were approximately $ 1.23 billion.

The initial conversion rate of the 2028 Notes is 6.1571 shares per $1,000 principal amount of notes, which is equivalent to a conversion price of approximately $ 162.41 per share, subject to adjustments.

The 2028 Notes may be settled in cash, stock, or a combination thereof, solely at our discretion.

We use the if-converted method for assumed conversion of the 2028 Notes to compute the weighted average shares of common stock outstanding for diluted earnings per share.

No principal payments are due on the 2028 Notes prior to maturity.

Other than restrictions relating to certain fundamental changes and consolidations, mergers or asset sales and customary anti-dilution adjustments, the indenture relating to the 2028 Notes includes customary terms and covenants, including certain events of default after which the 2028 Notes may be due and payable immediately.

Conversion Rights at the Option of the Holders

In the event of a fundamental change (as defined in the indenture related to the 2028 Notes), holders of the 2028 Notes have the right to require us to repurchase for cash all or a portion of their notes at a price equal to 100 % of the principal amount of the 2028 Notes, plus any accrued and unpaid interest.

Holders of the 2028 Notes who convert their notes in connection with a make-whole fundamental change (as defined in the indenture) or following the delivery by Dexcom of a notice of redemption are, under certain circumstances, entitled to an increase in the conversion rate.

Prior to 5:00 p.m., New York City time, on the business day immediately preceding February 15, 2028, holders of the 2028 Notes may convert all or a portion of their notes, in multiples of $1,000 principal amount, only under the following circumstances:

(1) during any calendar quarter commencing after September 30, 2023 (and only during such calendar quarter), if the last reported sale price of Dexcom’s common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the applicable conversion price of the Notes on each such trading day;

(3) if we call any or all of the Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date;

(4) upon the occurrence of specified corporate transactions.

On or after February 15, 2028, until 5:00 p.m., New York City time, on the second scheduled trading day immediately preceding the maturity date, holders of the 2028 Notes may convert all or a portion of their notes regardless of the foregoing circumstances.

Conversion Rights at Our Option

Dexcom may not redeem the 2028 Notes prior to May 20, 2026.

On or after May 20, 2026 and prior to February 15, 2028, Dexcom may redeem for cash all or part of the 2028 Notes, at its option, if the last reported sale price of our common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which Dexcom provides notice of redemption.

The redemption price will be equal to 100 % of the principal amount of the 2028 Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date.

On February 13, 2024, we entered into a warrant termination agreement with one of the 2023 Counterparties to terminate outstanding warrants to purchase an aggregate of 10.3 million shares of common stock.

In consideration of the termination of these warrants, we delivered 6.0 million shares of our common stock to the holder.

During the first quarter of 2024, a portion of the 2023 Warrants was exercised and we issued 1.9 million shares of our common stock in addition to the aforementioned 6.0 million shares issued in connection with the warrant termination agreement.

2028 Capped Call Transactions

In May 2023, in connection with the offering of the 2028 Notes, we entered into privately negotiated capped call transactions (the “2028 Capped Calls”) with certain financial institutions.

The 2028 Capped Calls will cover, subject to anti-dilution adjustments substantially similar to those applicable to the 2028 Notes, the number of shares of our common stock that will initially underlie the 2028 Notes.

In May 2023, in connection with the offering of the 2028 Notes, we entered into privately negotiated capped call transactions, or the 2028 Capped Calls, with certain financial institutions.

The 2028 Capped Calls cover, subject to anti-dilution adjustments substantially similar to those applicable to the 2028 Notes, the number of shares of our common stock initially underlying the 2028 Notes.

The 2028 Capped Calls are expected generally to reduce potential dilution to our common stock upon conversion of the 2028 Notes and/or offset any cash payments that we are required to make in excess of the principal amount of converted 2028 Notes, as the case may be, with such reduction and/or offset subject to a cap.

1 unchanged sentence

The cost to purchase the 2028 Capped Calls of $ 101.3 million was recorded as a reduction to additional paid-in capital in our consolidated balance sheets as the 2028 Capped Calls met the criteria for classification in stockholders’ equity.

Conversion Activity for Senior Convertible Notes

The 2023 Notes matured on December 1, 2023 and all outstanding principal was settled.

There was no conversion activity for the 2025 Notes or 2028 Notes for the three months ended March 31, 2024 .

See the following table for the details of conversion activity for the 2023 Notes for the fiscal year ended December 31, 2023:

Fiscal Period

Converted Notes

Aggregate Principal Amount Converted

Shares Issued for Settlement

Shares Received from Exercise of 2023 Note Hedge

1/1/2023 - 12/31/2023

$ 774.8 million

Conversion Rights for Senior Convertible Notes

Holders of our outstanding senior convertible notes have the right to require us to repurchase for cash all or a portion of their notes at 100 % of their principal amount, plus any accrued and unpaid interest, upon the occurrence of a fundamental change (as defined in the applicable indenture relating to the notes).

We are also required to increase the conversion rate for holders who convert their notes in connection with certain fundamental changes occurring prior to the maturity date or following the delivery by Dexcom of a notice of redemption.

The following table outlines the conversion options related for each of our senior convertible notes:

Summary of Conversions Rights at the Option of the Holders for the 2025 Notes and 2028 Notes, which we refer to collectively as the Notes

Conversion Rights at the Option of the Holders

Holders of the Notes have the ability to convert all or a portion of their notes in multiples of $1,000 principal amount, at their option prior to 5:00 p.m., New York City time, on the business day immediately preceding August 15, 2025 and February 15, 2028 for the 2025 Notes and 2028 Notes, respectively, only under the following circumstances:

Circumstance 1 (1)

During any calendar quarter commencing after the applicable period (and only during such calendar quarter), if the last reported sale price of Dexcom’s common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the applicable conversion price for the Notes on each applicable trading day

Circumstance 2

During the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the Notes for each trading day of that five consecutive trading day period was less than 98 % of the product of the last reported sale price of Dexcom’s common stock and the applicable conversion rate of the Notes on each such trading day

Circumstance 3

If we call any or all of the Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date (only with respect to the notes called or deemed called for redemption)

Circumstance 4

Upon the occurrence of specified corporate events

Circumstance 5 (2)

Holders of the Notes may convert all or a portion of their Notes regardless of the foregoing circumstances prior to the close of business on the business day immediately preceding the maturity date for the 2025 Notes and prior to the close of business on the second scheduled trading day immediately preceding the maturity date for the 2028 Notes

(1) Circumstance 1 is available after the calendar quarter ended September 30, 2020 and September 30, 2023 for the 2025 Notes and 2028 Notes, respectively.

(2) Circumstance 5 is available on or after August 15, 2025 and February 15, 2028 for the 2025 Notes and 2028 Notes, respectively.

Summary of Conversion Right at the Option of the Company for the 2025 Notes and 2028 Notes

Conversion Right at Our Option (1)

Dexcom may redeem for cash all or part of the Notes, at its option, if the last reported sale price of our common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which Dexcom provides notice of redemption.

The redemption price will be equal to 100 % of the principal amount of the Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date

(1) Dexcom does not have the right to redeem the Notes prior to May 20, 2023 and May 20, 2026 for the 2025 Notes and 2028 Notes, respectively.

Dexcom has the right to redeem the notes on or after May 20, 2023 and prior to August 15, 2025 for the 2025 Notes, and on or after May 20, 2026 and prior to February 15, 2028 for the 2028 Notes.

Revolving Credit Agreement

Terms of the Revolving Credit Agreement

In June 2023, we entered into the First Amendment to the Second Amended and Restated Credit Agreement (the "Amended Credit Agreement"), which we had previously entered into in October 2021.

The Amended Credit Agreement is a five-year revolving credit facility, that provides for an available principal amount of $ 200.0 million which can be increased up to $ 500.0 million at our option subject to customary conditions and approval of our lenders (the “Credit Facility”).

In June 2023, we entered into the First Amendment to the Second Amended and Restated Credit Agreement, as amended, or the Amended Credit Agreement, which we had previously entered into in October 2021.

The Amended Credit Agreement is a five-year revolving credit facility, or the Credit Facility, that provides for an available principal amount of $ 200.0 million which can be increased up to $ 500.0 million at our option subject to customary conditions and approval of our lenders.

The Amended Credit Agreement will mature on October 13, 2026.

1 unchanged sentence

Information related to availability and outstanding borrowings on our Amended Credit Agreement is as follows as of the date indicated:

(In millions) September 30, 2023

(In millions) March 31, 2024

Available principal amount 200.0

4 unchanged sentences

Revolving loans under the Amended Credit Agreement bear interest at our choice of one of three base rates plus a range of applicable rates that are based on our leverage ratio.

The first base rate is the Alternate Base Rate (“ABR”) and loans comprising each ABR borrowing shall bear interest at the ABR plus the applicable rate between 0.375 % to 1.000 %.

The ABR is the highest of (a) the prime rate last quoted by The Wall Street Journal, (b) the Federal Reserve Bank of New York rate plus one half of 1%, and (c) the Adjusted Term Secured Overnight Financing Rate (“Term SOFR”) for a one month interest period plus 1 %.

The second base rate is the Term Benchmark rate and loans comprising each Term Benchmark borrowing shall bear interest at the Adjusted Term

SOFR, the Adjusted Euro Interbank Offered Rate, the Adjusted Stockholm Interbank Offered Rate, the Adjusted Canadian Dollar Offered Rate, Adjusted Australian Dollar Rate, the Adjusted Bank Bill Benchmark Rate or the Adjusted Tokyo Interbank Offered Rate, as applicable based on the currency denomination borrowed, plus the applicable rate between 1.375 % to 2.000 %.

The third base rate is the Adjusted Daily Simple RepoFunds Rate (“RFR”) and loans comprising each Daily Simple RFR Loan shall bear interest at a rate per annum equal to the applicable Daily Simple RFR for Sterling or Dollars (as applicable) plus the applicable rate between 0.0326 % to 0.100 % depending on the loan denomination.

We will also pay a commitment fee of between 0.175 % and 0.250 %, payable quarterly in arrears, on the average daily unused amount of the revolving facility based on our leverage ratio.

The minimum and maximum range of applicable rates per annum with respect to any ABR Loan, Term Benchmark Revolving Loan, or RFR Revolving Loan, each as defined in the Amended Credit Agreement under the captions “ABR Spread”, “Term Benchmark/CDOR Spread”, and “RFR Spread”, or “Unused Commitment Fee Rate”, respectively, are outlined in the following table:

Term Benchmark/CDOR Spread and RFR Spread

Unused Commitment Fee Rate

Our obligations under the Amended Credit Agreement are guaranteed by our existing and future wholly-owned domestic subsidiaries, and are secured by a first-priority security interest in substantially all of the assets of Dexcom and the guarantors, including all or a portion of the equity interests of our domestic subsidiaries and first-tier foreign subsidiaries but excluding real property and intellectual property (which is subject to a negative pledge).

1 unchanged sentence

The Amended Credit Agreement also requires us to maintain a maximum leverage ratio and a minimum fixed charge coverage ratio.

We were in compliance with these covenants as of September 30, 2023.

As of September 30, 2023, we also have a guarantee facility related to our international operations which is collateralized by a $ 5.3 million term deposit that is included in non-current “Other assets” on our consolidated balance sheets.

We were in compliance with these covenants as of March 31, 2024.

As of March 31, 2024, we have no other material guarantee facilities or lines of credit.

Contingencies

1 unchanged sentence

In addition, from time to time we may bring claims or initiate lawsuits against various third parties with respect to matters arising out of the ordinary course of our business, including commercial and employment related matters.

Between June 2021 through the nine months ended September 30, 2023, we and certain Abbott Diabetes Care, Inc.

(“Abbott”) entities have served complaints against each other in multiple jurisdictions, including in the United States (United States District Court ("U.S.D.C.”), District of Delaware), the United Kingdom (Business and Property Courts of England and Wales), France (United Patent Court (“UPC”) in Paris), Spain (Commercial Courts of Barcelona) and Germany (National Courts (“N.C.”) of Munich, Mannheim, Dusseldorf and Hamburg and the UPC in Munich), primarily involving claims of patent infringement, invalidity and other patent related actions.

In June and July of 2021, we initiated patent infringement litigation against Abbott in the United States (U.S.D.C., Western District of Texas) and Germany (N.C.

in Mannheim) and filed additional patent infringement actions in May 2023 in Germany (N.C.

in Munich) over certain of Abbott's continuous glucose monitoring products.

In July and August 2023, we initiated patent infringement litigation in France and Germany in the UPC and in Spain (Commercial Courts of Barcelona).

Between July 2021 through the nine months ended September 30, 2023, Abbott initiated patent infringement litigation against Dexcom in multiple jurisdictions, including the United States (U.S.D.C., Delaware), the United Kingdom (Business and Property Courts of England and Wales), and in Germany (N.C.

in Mannheim, Dusseldorf and Hamburg) over certain of Dexcom's continuous glucose monitoring products.

In response to the lawsuits initiated by Abbott in the United Kingdom, Dexcom also filed patent infringement counterclaims in that jurisdiction.

Three trials on liability have already been conducted in the United Kingdom.

On October 18, judgment was handed down in favor of Dexcom in one of these trials.

The parties are awaiting rulings on the remaining two .

Dexcom and Abbott seek injunctive relief and monetary damages as a result of their respective claims.

In December 2021, Abbott filed a breach of contract lawsuit against Dexcom in the U.S.D.C., District of Delaware alleging that Dexcom breached the parties' Settlement and License Agreement dated July 2, 2014 (“SLA”).

The U.S.D.C., District of Delaware consolidated Abbott’s breach of contract lawsuit with Dexcom’s patent infringement lawsuit which had been transferred from the U.S.D.C., Western District of Texas.

Dexcom asserted counterclaims that Abbott also breached the SLA.

A jury trial on Abbott’s breach of contract claims commenced on July 10, 2023.

On July 14, 2023, the jury verdict determined that Abbott was not licensed to thirteen claims of certain Dexcom patents and that Abbott was licensed to five claims.

Dexcom’s patent infringement claims in Delaware are stayed until November 10, 2023, at which point the U.S.

Patent and Trademark Office will have issued

its final written decisions on certain patents involved in the lawsuit.

We will continue to enforce the remaining claims of the patents asserted in Delaware.

Abbott’s patent infringement action against Dexcom is currently scheduled for trial in the U.S.D.C., District of Delaware on March 11, 2024.

In the lead up to trial, the U.S.D.C., District of Delaware invalidated one of Abbott’s patents and Abbott dropped four other patents from the litigation.

Commencing in December 2023, Abbott has several patent infringement hearings against Dexcom in the National Court in Hamburg and Munich wherein Abbott is seeking damages and injunctive relief.

In March and April of 2024, Dexcom has several patent infringement hearings in Munich against Abbott, wherein Dexcom is seeking damages and injunctive relief.

Due to uncertainty surrounding patent litigation procedures initiated by Dexcom and Abbott throughout multiple jurisdictions, we are unable to reasonably estimate the ultimate outcome of any of the litigation matters at this time.

Between June 2021 through the three months ended March 31, 2024, we and certain Abbott Diabetes Care, Inc.

(“Abbott”) entities have served patent infringement complaints against each other in multiple jurisdictions against certain continuous glucose monitoring products of each company.

Abbott’s patent infringement trial, “D1”, against Dexcom commenced in the U.S.D.C., District of Delaware in March 2024.

In the lead up to trial, the U.S.D.C., District of Delaware invalidated one of Abbott’s patents on factory calibration and Abbott dropped four other patents from the litigation.

The claims litigated were isolated to the inserter mechanism and the wearable seal and mount of Dexcom’s G6.

On March 22, 2024, a jury returned a mixed verdict.

The jury found that Dexcom infringes one patent, that Dexcom did not infringe a second patent, and that Dexcom also did not infringe a third patent, which the jury also found invalid.

The jury found that any infringement was not willful.

It could not reach unanimity as to a fourth patent.

No determination of damages was made or awarded by the jury.

Dexcom will challenge the sole finding of infringement and continue to defend itself vigorously.

We analyzed the potential for a loss from this litigation in accordance with ASC 450, Contingencies.

We believe it is not probable that we will have an unfavorable outcome and incur a material loss contingency due to our beliefs about our position in the case.

In addition, the jury did not award damages for the one patent they believe we infringed nor can we reasonably estimate the amount of loss we would incur if we do not prevail.

As a result, we have not recorded an accrual for a contingent liability.

Due to uncertainty surrounding the other patent litigation procedures initiated by Dexcom and Abbott throughout multiple jurisdictions, we are unable to reasonably estimate the ultimate outcome of any of the litigation matters at this time.

We intend to protect our intellectual property and defend against Abbott’s claims vigorously in all of these actions.

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We estimate our annual effective tax rate to be 23.8 % for the full year 2024, which differs from the U.S.

federal statutory rate due to state and foreign income taxes, nondeductible executive compensation, increases to unrecognized tax benefits, and impact of foreign operations, partially offset by federal tax credits generated.

Our actual effective tax rate of 38.6 % for the nine months ended September 30, 2023 was primarily due to income tax expense from normal, recurring operations, increased by discrete foreign taxes related to an intra-entity transfer of certain intellectual property, and decrease in the state tax rate applied to beginning of year deferred tax assets, partially offset by tax benefits recognized for share-based compensation for employees, net of disallowed executive compensation.

In August 2023, we completed an intra-entity asset transfer of certain intellectual property between two of our wholly owned foreign subsidiaries to align our structure with the expansion of international business operations.

We recorded a $ 186.6 million deferred tax asset, which represents the difference between the basis of the intellectual property for financial statement and tax purposes, applying the appropriate enacted statutory tax rate.

Based on available evidence, management believes it is not more-likely-than-not that the additional foreign deferred tax asset will be realizable, and is therefore, fully offset by a valuation allowance.

The transfer resulted in $ 65.2 million of net tax expense, which increased our actual effective tax rate for the nine months ended September 30, 2023.

federal statutory rate due to state and foreign income taxes and nondeductible executive compensation, partially offset by federal tax credits generated.

Our negative effective tax rate of 10.5 % for the three months ended March 31, 2024 was primarily due to income tax expense from normal, recurring operations, offset by tax benefits recognized for share-based compensation for employees, net of disallowed executive compensation, and the Verily milestone payment.

The Organization for Economic Co-operation and Development has a framework to implement a global minimum corporate tax of 15% for companies with global revenues and profits above certain thresholds (referred to as Pillar 2), with certain aspects of Pillar 2 effective January 1, 2024 and other aspects effective January 1, 2025.

While it is uncertain whether the United States will enact legislation to adopt Pillar 2, certain countries in which we operate have adopted legislation, and other countries in which we operate are in the process of introducing legislation to implement Pillar 2.

We have assessed the impact of Pillar 2 and the impact is immaterial.

In January 2024, the California Franchise Tax Board commenced an audit of our California income tax returns for the 2020 and 2021 years primarily related to our research and development tax credit carryforwards.

We do not expect any significant adjustments as a result of the audit.

Stockholders’ Equity

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Three Months Ended

September 30, Nine Months Ended

September 30,

(In millions) 2024 2023

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Total share-based compensation expense $ 39.0 $ 35.2

At September 30, 2023, unrecognized estimated compensation costs related to RSUs, PSUs and ESPP totaled $ 238.4 million and are expected to be recognized through 2027.

Equity Award Activity

The total vest date fair value of RSUs and PSUs that vested during the nine months ended September 30, 2023 was $ 138.5 million and $ 9.9 million, respectively.

Share Repurchase Program and Treasury Shares

On July 26, 2022, a duly authorized committee of our Board of Directors authorized and approved a share repurchase program of up to $ 700.0 million of our outstanding common stock, with a repurchase period that ended on June 30, 2023 (the “2022 Share Repurchase Program”).

Shares of common stock repurchased under the 2022 Share Repurchase Program became treasury shares.

We repurchased approximately $ 557.7 million of our outstanding common stock throughout the duration of the 2022 Share Repurchase Program.

The 2022 Share Repurchase Program and the remaining authorization of approximately $ 142.3 million expired on June 30, 2023.

There were no share repurchases under the 2022 Share Repurchase Program in 2023.

In May 2023, we used a portion of the proceeds of the 2028 Notes to repurchase 1.6 million shares of our common stock for $ 188.7 million, excluding excise tax due under the Inflation Reduction Act of 2022, for an average per share price of $ 118.12 , via privately negotiated transactions, independent of the 2022 Share Repurchase Program.

As of March 31, 2024, unrecognized estimated compensation costs related to RSUs and PSUs totaled $ 362.5 million and are expected to be recognized over a weighted-average period of approximately 2.2 years.

Treasury Shares

In the first quarter of 2024, we issued 7.9 million treasury shares to settle a portion of the 2023 Warrants.

See Note 5 “ Debt—Senior Convertible Notes ” to the consolidated financial statements for more information.

In the first quarter of 2024, we issued 1.5 million treasury shares in connection with our achievement of the second sales-based milestone under the Restated Collaboration Agreement.

See Note 2 “ Development and Other Agreements—Collaboration with Verily Life Sciences ” to the consolidated financial statements for more information.

Repurchased shares of our common stock are held as treasury shares until they are reissued or retired.

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Reportable Segments

An operating segment is identified as a component of a business that has discrete financial information available and for which the chief operating decision maker must decide the level of resource allocation.

An operating segment is identified as a component of a business that has discrete financial information available and for which the CODM must decide the level of resource allocation.

In addition, the guidance for segment reporting indicates certain quantitative materiality thresholds.

None of the components of our business meet the definition of an operating segment.

We currently consider our operations to be, and manage our business globally within, one reportable segment, which is consistent with how our President and Chief Executive Officer, who is our chief operating decision maker, reviews our business, makes investment and resource allocation decisions, and assesses operating performance.

We currently consider our operations to be, and manage our business globally within, one reportable segment, which is consistent with how our President and Chief Executive Officer, who is our CODM, reviews our business, makes investment and resource allocation decisions, and assesses operating performance.

Disaggregation of Revenue

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Revenue by geographic region

During the three and nine months ended September 30, 2023 and September 30, 2022, no individual country outside the United States generated revenue that represented more than 10% of our total revenue.

During the three months ended March 31, 2024 and March 31, 2023, no individual country outside the United States generated revenue that represented more than 10% of our total revenue.

The following table sets forth revenue by our two primary geographical markets, the United States and International, based on the geographic location to which we deliver the components, for the periods shown:

Three Months Ended

September 30, 2023 Three Months Ended

September 30, 2022

(In millions) Amount % of Total Amount % of Total

United States $ 713.6 73 % $ 573.4 75 %

International 261.4 27 % 196.2 25 %

Total revenue $ 975.0 100 % $ 769.6 100 %

Nine Months Ended

September 30, 2023 Nine Months Ended

September 30, 2022

March 31, 2024 Three Months Ended

March 31, 2023

(In millions) Amount % of Total Amount % of Total

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Three Months Ended

September 30, 2023 Three Months Ended

September 30, 2022

(In millions) Amount % of Total Amount % of Total

Distributor $ 839.7 86 % $ 656.2 85 %

Direct 135.3 14 % 113.4 15 %

Total revenue $ 975.0 100 % $ 769.6 100 %

Nine Months Ended

September 30, 2023 Nine Months Ended

September 30, 2022

March 31, 2024 Three Months Ended

March 31, 2023

(In millions) Amount % of Total Amount % of Total

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Total revenue $ 921.0 100 % $ 741.5 100 %

Subsequent Events

On October 24, 2023, our Board of Directors authorized and approved a share repurchase program of up to $ 500.0 million of our outstanding common stock, with a repurchase period ending no later than October 31, 2024 (the “2023 Share Repurchase Program”).

Repurchases of our common stock under the 2023 Share Repurchase Program may be made from time to time, on the open market, in privately negotiated transactions or by other methods, at our discretion, and in accordance with the limitations set forth in Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended, and other applicable federal and state laws and regulations.

The timing of any repurchases will depend on market conditions and will be made at our discretion.

The 2023 Share Repurchase Program does not obligate us to repurchase any dollar amount or number of shares, and the program may be extended, modified, suspended, or discontinued at any time.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements